China’s economy will become a strong backing

On the first trading day of 2018, the yuan's gains far exceeded expectations. "We started to raise the exchange rate forecast last year, but we still can't keep up with the speed of RMB appreciation." A foreign bank economist told the First Financial Reporter.

On January 2, the central parity of the yuan against the US dollar rose by 263 basis points, the strongest since September 11 last year. Both the onshore and offshore RMB intradays broke through the 6.50 integer mark. The official closing price of the RMB against the US dollar was 6.4967, which was the highest since the beginning of September 2017, up 153 basis points from the previous trading day.

Instead, the dollar fell against a basket of other currencies that day. For the whole year, the trend of the US dollar's appreciation for four consecutive years was broken in 2017, and it closed down 10% for the whole year. It has been the worst performer since 2003.

Many traders told the First Financial Reporter that after the US interest rate hike and tax reform, the US dollar not only did not skyrocket, but fell, mainly due to the accumulation of market disappointment with the US dollar, resulting in an increase in the amount of foreign exchange. Speculators who previously bet on the depreciation of the yuan closed their positions.

Looking forward to 2018, it is widely expected that the US dollar index will operate in the range of 92 to 100, and the RMB is expected to operate in the range of 6.45 to 6.9. "The dollar may have slightly strengthened in 2018 after a weak 2017." Zhou Hao, a senior economist at the German commercial bank, told the First Financial Reporter that the yuan is expected to run at 6.8 or higher by the end of 2018. .

The dollar is not good, the yuan is stronger

The strong trend of the renminbi stems from the continued weakness of the US dollar.

As of 16:00 Beijing time on January 2, the US dollar index fell 0.26%, falling below the 92 mark at 91.75, the lowest level since September 22 last year.

Traders began to look forward to the minutes of the Fed's December 2017 meeting, which will be released at 3 o'clock on January 4th, Beijing time, and analyze the future trend of monetary policy. In addition, the US December 2015 non-farm payrolls report released on Friday night is also attracting attention, and is expected to have a significant impact on the market.

At present, many analysts believe that since 2017, the weakening of the US dollar was due to the fact that the momentum of global economic growth has increased the expectations of other countries' tightening monetary policy, resulting in a narrowing of the spread between the Federal Reserve and other central banks. In addition, “although the Fed raised interest rates three times in 2017 and began to shrink, the US inflationary downturn has curbed the market's bullish space for the US dollar. This has made the US Treasury yield curve once the flattest level in a decade, which is also limiting the US dollar. The key factor for the rise." FXTM China market analyst Zhong Yue told the First Financial Reporter.

It is worth noting that this round of RMB rally began to brew before Christmas last year.

Starting around December 20, 2017, the renminbi began to rise rapidly and reached a low of 6.55 on December 21.

Since December 25, 2017, the renminbi has been in full swing. On the other hand, the renminbi has risen by nearly 400 basis points against the US dollar. It has renewed its new high to 6.5387 since September 15, and broke the four major barriers of 6.57, 6.56, 6.55 and 6.54.

On December 26, 2017, the central parity of the RMB against the US dollar was reported at 6.5416, up 267 points from the previous trading day, the highest since September 13.

The expectation of RMB depreciation, which lasted for more than a year, has been reversed, and it has nothing to do with the countercyclical factor of the 2017 moon phase.

Zhang Ming, director of the International Investment Research Office of the Institute of World Economics and Politics of the Chinese Academy of Social Sciences, told the First Financial Reporter: "Most of the appreciation of the renminbi was achieved after the countercyclical factor was added in late May 2017."

After the introduction of the factor for three months, the appreciation of the renminbi against the US dollar reached 4%. Even in the context of the US dollar regaining strength in October last year, the renminbi was not much disturbed.

The renminbi will be more stable

The first financial reporter found in the interview that many investors and people with foreign exchange needs have been consulting agencies recently – how long can the RMB be strong? Is it time to buy a foreign exchange now?

In this regard, the agency generally believes that the US dollar may be slightly stronger in 2018, but as the impact of the renminbi on the dollar is decreasing, it will not face too much depreciation pressure, and will maintain a high probability of maintaining a range of fluctuations.

In the short term, the dollar may rebound slightly. Senior foreign exchange analyst Han Huishi said that the recent surge in the renminbi was related to the offshore market during the Christmas vacation.

Despite this, the agency believes that the trend of the renminbi this year will be more stable.

Xie Shangxuan, chief macro analyst of China Merchants Securities (17.540, 0.00, 0.00%) told the First Financial Reporter that the RMB exchange rate is expected to fluctuate within the range of 6.45~6.95 in 2018. Cross-border capital flows will still be small-scale net outflow in 2018, but enterprises The purchase of foreign exchange for the repayment of debts ended, and the purchase of foreign exchange by residents is expected to be stable.

According to data released by the People's Bank of China on December 7, 2017, at the end of November, the size of foreign exchange reserves was 3,119.28 billion US dollars, an increase of 10.1 billion US dollars from the end of October, an increase of 0.3%, which was the 10th consecutive month of recovery. “A rough calculation, the impact of the valuation efficiency of the euro and the pound in November on the appreciation of the dollar has increased the foreign reserves by about 14 billion US dollars.” Liu Jian, a senior researcher at the Bank of Communications (6.280, 0.00, 0.00%) Financial Research Center .

The Chinese economy will become a strong backing for the renminbi.

Bank of China (3.980, 0.00, 0.00%) The International Finance Research Institute recently released a report that predicts that China's economy will grow by about 6.7% in 2018, but it will focus more on improving quality and efficiency while growing steadily.

The National Development and Strategy Research Institute of Renmin University of China also predicts that China's macro economy will maintain a relatively stable development trend in 2018, with an economic growth rate of 6.7%.

The dollar will still be stronger than the euro

Looking at the world, 2018 will be a challenging and challenging year for governments and central banks.

As far as the euro is concerned, KVB Kunlun International Forex Analyst Yu Zhiqi told the First Financial Reporter: "The current trend remains bullish, especially after successfully surpassing the 1.1940, the upward target looks at 1.2033."

Guy Stear, an analyst at Société Générale (17.240, 0.00, 0.00%), expects the European Central Bank to raise interest rates in March and June 2019, completely ending the era of negative deposit interest rates.

Zhang Ming said that the dollar may still be stronger than the euro in 2018. "The European Central Bank will halve the quantitative easing (QE) this year, but it is still in the process of expanding the table. The Fed is raising interest rates and shrinking tables simultaneously; in addition, this year The political risks in Europe may rise again, and the US tax reform is officially passed. The political risk in 2018 seems to be less than 2017."

The Bank of England announced a rate hike on November 2, 2017. This is the first time the UK has raised interest rates since the financial crisis. The main driver is inflation that broke 3%. However, it is expected that the interest rate hike may only be "one-off", and political uncertainty will still prevent the Bank of England from continuing to raise interest rates.

Song Lin, a macroeconomic analyst at CCB International, told reporters that the UK has made a compromise on the Brexit position and that the direction of the Brexit negotiations will gradually become clear, and the two-year transition period will also be reserved for the UK and the EU. More time for consultation and the formulation of new trade relations, "It is expected that the pound will be low and high after 2018. The main factors are the catalyst of the US dollar (tax reform, interest rate hike), the spread between the UK and the US, and the process of the Brexit negotiations. In 2018, the range of GBP/USD is forecast to be between 1.3 and 1.38."